Core Banking

Modernisation
Are you locked into the core?
The legacy core banking setup is being
challenged by digital transformation, and we
are at a turning point. It is time to rethink!

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If the answer is yes, then it is time
to modernise your core
Core Banking Solutions (CBS) modernisation unlocks a digital revolution,
seamlessly integrating emerging technologies, products, services,
collaboration in the banking ecosystem, and much more. It is your key to
unrivalled competitiveness and regulatory compliance.

Why Indian banks must embrace core banking modernisation for a

future-ready financial landscape?

Core banking modernisation is imperative for Indian banks to navigate a future-ready financial
landscape successfully.
This transformation is essential to enhance customer experiences by providing seamless and
personalised services, foster innovation and agility for quick adaptation to market changes,
improve operational efficiency by reducing costs and manual processes, ensure compliance with
evolving regulations, enhance scalability and flexibility to accommodate growth, strengthen data security
and privacy, and ultimately gain a competitive advantage in the dynamic and technologically driven
financial industry.

Banking success hinges on seamlessly integrating CBS with advanced

channels, risk management, and business intelligence, shifting from pure
functionality to holistic synergy

Banks adopt scalable CBS, driving transformation for efficient handling of

complex multi-channel transactions and payments to cater to the demand for
diverse products and channels

Banks prioritise core banking modernisation for seamless digital

experiences, as outdated legacy systems hinder integration with modern
platforms, causing disjointed and disruptive customer interactions

Banks must adapt to evolving needs by adopting multi-core systems-

blending an existing CBS with a new core-to enhance customer service, expand
Key trends channels, diversify products, and boost market share growth
from the
industry Driven by evolving financial regulations and concerns about consumer
protection, digital assets, and climate issues, banks are compelled to
modernise core banking systems for enhanced agility and adaptability

Legacy banking systems with hard-coded rules and poor documentation

poses hurdles, prompting banks to move towards modernisation for user-
friendly experiences

The rise in mergers and acquisitions among banks necessitates the

consolidation of diverse CBS, urging the imperative to modernise and
standardise the solution through seamless integration of the two systems

Intense market competition, driven by tech-savvy start-ups and neo-banks

necessitates banks to embrace CBS modernisation for enhanced agility,
including the adoption of Banking as a Service (BaaS)

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Next-generation core banking solutions
There has been a significant shift in the banking sector, leading to higher
transaction volumes, straight-through processing, and overall growth in deposits
and lending. This puts the requirement of next-gen solutions to overcome the
limitations of legacy systems and enable banks to stay competitive, drive
innovation, and deliver exceptional financial solutions to their customers.

Effect of CBS modernisation on banks

Core banking modernisation revolutionizes financial institutions, enhancing operational efficiency,

customer experiences, and overall competitiveness through streamlined processes, innovation, and
improved security measures.

Reduces Facilitate real-time Microservices Offer easy Modernisation

operating costs by transaction architecture in scalability to opens avenues for
eliminating processing, modern banking accommodate open banking,
monolithic setups enhancing customer systems allow for varying fostering
experience and swift updates and transaction collaboration,
employee adaptation to volumes or business and access to
productivity market changes expansions innovative
technologies

16.62% US$370.50 Bn US$9.6 Tn US$175.4 Tn

CAGR 2023–2027 45% GDP 67.6% GDP
Total transaction value is expected to show Bank deposits in India have grown
an annual growth rate from 2023 to 2027 over the past two decades

US$2.2 Tn US$1.67 Tn 30% 27%

Deposits Loans Investment Fintech SaaS Fintech
Banking sector reported deposits and loans Fintech in India is expected to grow over the
in large volumes in FY23 years from 2022 to 2030

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Unlocking competitive advantage:
Embrace innovation by rewriting your legacy
Banks must modernise their outdated systems to avoid rising costs and
adapt swiftly to compliance and customer demands. Modernisation is
crucial for enhancing customer experiences, strategically cutting costs, and
seizing new business opportunities in a competitive market.

Bank legacy platform

> 10 Years

Bank legacy platform

Digital wrapper on
> 7 years
premise
Glass
ceiling

Bank legacy platform

Digital wrapper

Between >
4 years to Bank legacy platform
current Banking technology platform
market

Banking technology platform

Product commoditisation
Legacy upgrades
Short term Process automation
Data/AI
Security

Future of digital distribution

Long term Financial aggregators as a commodity marketplace

Undertaking core modernisation in banking requires a deep dive into the current landscape,
strategic planning for short-term objectives, and careful consideration of long-term goals.

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Path for next-gen core banking modernisation
Banks must propel CBS modernisation to align with dynamic customer
expectations, adapt to evolving regulations, and enhance competitiveness
against digital fintech challengers.

Many legacy systems process transactions in batches during an end-of-

Real-time day process, which involves using shadow balances instead of real-time
functionality updates, posing a challenge in re-architecting interfaced ecosystems for
real-time processing.

Traditional systems often rely on hard-coded

Business rules business rules, resulting in high costs and delays
are commonly in changes. The lack of rule configuration through
hardcoded flexible parameterisation and user-friendly interfaces
leads to disruption.

In the heavily regulated banking sector, legacy

Navigating systems fall short in adapting to frequent
regulatory regulatory changes, hindering seamless functions
landscape such as KYC checks and anti-money laundering
processes in an accessible format.

Integrating Seamless integration of customer data, transaction

disparate histories, and operational processes. Transferring
systems in vast amounts of financial data can lead to errors,
M&As security concerns, and service disruptions.

Legacy systems are often heavily customised and inadequately documented. This poses
Extreme
challenges in knowledge retention and hinders effective modernisation planning for ongoing
customisation
business functionality.

How can banks implement

CBS modernisation

Big bang modernisation: Full Progressive modernisation: Gradual and Greenfield banking:
core replacement requires phased approach to updating or replacing Establishment of a
thorough planning to cover all components of a bank's core banking system over new bank or the
aspects, like: time. This includes: development of a new
• Digital capabilities • Rollout of a new core banking system through banking system from
selected modules scratch without
• Number of business products
inheriting any legacy
• Volumes—to size the hardware • Gradual migration of simpler products or
systems or
customer segments in core banking to reduce
• Non-functional capabilities infrastructure
load on the current CBS
• Data migration—including a
• Decouple core banking and adopt
history of the data to
microservices for modular business capabilities
be migrated
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Path for next-gen core banking
modernisation (1/2)
New-age core banking solutions can help Indian banks thrive by enhancing
operational efficiency and fostering innovation.

Service-oriented platforms

Platforms that offer service-oriented

architecture (SOA)–based designs and enable Cloud-native platforms
real-time processing. Typically offered as
hosted software-as-a-service (SaaS) solutions, Platforms that leverage microservices-based
these platforms generally utilise a licence and architecture with application programming interfaces
subscription-based model. (APIs) providing access to and from other internal
and external services

Big bang overhaul of CBS Shift through progression

The planning phase will be around 5–12 months, and Facilitate large banks with legacy estate and
execution around 18–42 months, depending on size. numerous banking applications catering to various
Key services will include: business lines, capabilities, products, and processes.
• Comprehensive system overhaul to align with • Phased approach to establishing cloud-native
the digital era, ensuring a seamless transition cores for simpler services like digital channels,
from branch-centric to digital operations. progressively expanding to more complex lines
• Digital-first architecture provides a modern, • Step-by-step transition, allowing banks to move
customer-centric experience, integrating mobile simpler product lines or specific customer
and online platforms into the core for enhanced segments like savings accounts and certificates of
accessibility and functionality. deposit to new cores, ensuring a smooth
evolution
• Robust compliance frameworks, ensuring that
the updated core banking systems meet the • Extracting business capabilities like product
evolving regulatory requirements. and pricing management, customer management,
and statements from legacy systems, streamlining
• Integration of advanced analytics into core
the core to a transaction ledger. This enables
systems for enhanced customer services, risk
banks to integrate innovative microservices.
management, and strategic decision-making.

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Path for next-gen core banking
modernisation (2/2)
New-age core banking solutions can help Indian banks thrive by enhancing
operational efficiency and fostering innovation.

Hybrid approach and legacy

modernisation Technology stack implementation

A hybrid strategy ensures that banks retain the Facilitating the bank’s transformation journey to its
strengths of infrastructure systems while gaining the new technology stack for seamless integration with
agility and innovation potential of the cloud. existing operations in an agile manner for minimum
• Captive infra-to-cloud transition seamlessly friction during implementation.
transitioning on-premise infrastructure-based • Design the plan for the build by prioritising
core to the cloud environment preserves the business requirements, defining high-level user
benefits of infra while using the cloud. stories, ideal customer journeys, and appropriate
• Drive modernising complex legacy code for sprint planning.
banks, addressing challenges such as dated • Build and test for implementation with agile
technology, poor documentation, and a lack of development, SIT and UAT testing, and in-depth
specific technical skills. stakeholder engagement, communication, and
• Identify key areas for modernisation, training for the transfer of technical and
including user interfaces (UIs), batch processing, architectural best practices and incorporation of
and APIs within legacy core banking applications, the user’s behavioural insights.
leveraging cloud-native architecture. • Deploy pre-production for due diligence and
eventual organisation-wide roll-out.

Enterprise data modelling

Modernisation of banking portals and migration

Modernisation of customer touchpoints (i.e., websites Remodelling of data from disparate sources across
and mobile apps) to translate banks’ core banking the organisation into a single platform/tool/
modernisation into end-user value creation. system to create a single source/enterprise-level
• Product study, KPI definition, user experience, data repository.
VOC insights, and use case mapping, along with • Define business and data use cases to accurately
the creation of a product roadmap for the future. plan data re-architecture and remodelling, identify
• Establish design principles based on insights system performance and redundancy
and use cases. identification of personas, creating requirements, and map the source data model to
customer journeys, and conducting benchmarking a canonical data model.
activities with competition. • Extract, convert, transform, and migrate data
• Develop and deliver portal designs based on UX from outgoing platform(s) to the canonical model,
principles and feature and functionalities aimed at test the data compatibility, perform data integrity
elevating the experience of the bank’s user base. analysis for potential issues; and run pilot
data execution.
• Validate migrated data and create a
detailed data migration map and quality
assurance document.

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Ultimately, core modernisation is not just a
technology play but requires a strategy that
balances and promotes continuous
synchronisation across three building blocks.

What’s desirable from a customer

Product perspective? Will my customers love it?
desirability Will they tell their friends to check it out?
The North Star
The identification of
business use cases What’s viable from a business
Business perspective?
that fall within this sweet
viability Will it make money? How quickly?
spot is critical
to enable a phased core
modernisation.
What’s feasible from a technology
Technical perspective? What capabilities and new
feasibility platforms are needed?

Change management—a
crucial component of the
modernisation journey

Change management is crucial in banking

modernisation, ensuring smooth transitions
and maximising tech benefits. In today's
dynamic banking landscape, embracing
modernisation is essential for
competitiveness. However, it involves
significant organisational shifts. Effective
change management facilitates
seamless integration, minimises
disruptions, and fosters adaptability.
Engaging stakeholders, providing
training, and fostering open
communication channels are
key to successful
core modernisation.

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Voice of Business (VOB):
What do leading Indian banks say?

Shri Asheesh Pandey

In a conversation with the Managing Director, Bank of Maharashtra, he

encapsulates the essence of Core Banking System (CBS) modernisation and shares
his insights.

He mentions that "The future of banking lies in hollowing the core through
technology, where CBS becomes the orchestrator of seamless operations." He
emphasised the 360° transformative potential of integrating cutting-edge
technologies in banking. "Generative AI, Machine Learning, and Robotic Process
Automation serve as the architects of a new era in banking efficiency, ensuring rapid
payment processing, robust compliance, and frictionless government
transactions/execution of government schemes."

"In this transformative movement, the tech-savvy generation is a driving force,

engaging in summits and discussions that shape the path forward.“ With a visionary
perspective on CBS, he concluded,
“The core banking system of the future will act as the
General Ledger, wherein there will be rise of other peripheries:
such as centralised KYC processes, a dedicated hub for
payments and settlements, and separate servers acting as
distant alternate channels, driving a simplistic
banking approach.”

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Voice of Business (VOB): What do
leading Indian banks say? (contd..)

The Executive Director of the Bank of Maharashtra provided

valuable insights into the essence of Core Banking System (CBS)
modernisation. The Managing Director emphasised the pivotal
role of technology in shaping the future of banking, with a focus
on the following themes:

Core banking system (CBS) modernisation:

The core banking system of the future would likely act as a General Ledger,
wherein there would be the rise of other peripheries such as KYC processes being
centralised, payments settled through a dedicated hub, and ATM services and
other alternate channels managed separately. Additionally, government
transactions like PPF, NPS, and PMGSY will be handled through specific channels—
moving away from the existing core and towards a simplistic banking approach.

Integration of cutting-edge technologies:

Technology drives a comprehensive shift in banking, prioritising customer services
while focusing more on operations and compliance. Integrating cutting-edge tech
like Generative AI, Machine Learning, and Robotic Process Automation promises
transformative efficiency, ensuring swift payments, robust compliance, and
seamless government transactions. On-the-go robust compliance would be the
key to managing business going forward

Collaborative spirit in the industry:

Reflecting on the collaborative spirit within the industry, the tech-savvy generation
plays a very crucial role here. This generation is a driving force, actively engaging in
summits and discussions that shape the path forward in the transformative
movement of banking. Collaborative participation within and outside plays a key
role, whether in product/application development or testing or engaging in Proof
of Concept.

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Meet the team

Sanjay Kumar Gupta Govind Korekar Monish Shah

Partner Partner Partner
[email protected] [email protected] [email protected]

Aakash Tyagi
Director
[email protected]

Supriya Pachani
Associate Director
[email protected]

Ahijeet Das
Senior Consultant
[email protected]

Nandni Majithiya
Analyst
[email protected]

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